Annual Conference

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Investment Finance

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May 2019

The Pollution Premium

Kai LI, Po-Hsuan HSU, Chi-Yang TSOU
This paper studies the implications of environmental pollution on the cross-section of stock returns. A long-short portfolio constructed from firms with high versus low toxic emission intensity within industry generates an average return of 5.52% per annum. To explain this pollution premium, we deve...
Keywords: Toxic emissions, Regime shift risk, uncertainty, Environmental regulation, Cross-section of stock returns
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Annual Conference

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Investment Finance, Senior Fellows/Fellows

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May 2019

Premium for heightened uncertainty: Explaining pre-announcement market returns

Jun PAN, Haoxiang ZHU, Jiang WANG, Grace Xing HU
We find large overnight returns with no abnormal variance before nonfarm payrolls, ISM, and GDP announcements, similar to the pre-FOMC returns. To explain this common pattern, we propose a two-risk model with the uncertainty about the magnitude of the impending news' market impact as an additional r...
Keywords: Pre-Announcement Drift, Macroeconomic Announcements, FOMC, Heightened Uncertainty, VIX
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Annual Conference

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Investment Finance

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May 2019

Fundamental Risk Sources and Pricing Factors

Baek-Chun KIM, Zhanhui CHEN
Neoclassical theory suggests that stocks exposed to common pricing factors must face common production risks. We estimate firm-level productivity shocks and decompose them into six aggregate risk components via asymptotic principal component analysis. We find that fundamental risks drive 13 of 15 pr...
Keywords: productivity shocks, production-based asset pricing, pricing factors, empirical asset pricing models
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Annual Conference

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Corporate Finance

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May 2019

Loan Syndication Structures and Price Collusion

Jian CAI, Frederik EIDAM, Anthony SAUNDERS, Sascha STEFFEN
How does the organizational form of loan syndicates evolve and what are the effects on price collusion? We develop a novel measure of distance in lending expertise among syndicate lenders, and relate this novel measure to the organizational form of loan syndicates and loan pricing. Studying the U.S....
Keywords: Syndicated loans, Loan syndication structure, Loan pricing, Price collusion
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Annual Conference

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Corporate Finance, Capital Market Development: China and Asia

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May 2019

Going Bankrupt in China

Bo LI, Jacopo PONTICELLI
This paper investigates how legal reforms affect credit markets by studying the introduction of courts specialized in bankruptcy in China. We construct a new case-level dataset on corporate bankruptcy filings and exploit the staggered introduction of specialized courts across Chinese provinces. Spec...
Keywords: Financial Distress, Zombie firms, Judges, Court efficiency
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